Articles

Better Solutions For Housing Are Obvious

By: Anonymous

April 2021

How our city "leaders" are dealing with the dire and worsening state of housing in Seattle is completely broken. There's a saying that when you find yourself in a hole, you should probably stop digging. In the case of our city council in particular, the presence of the hole they've dug seems to only inspire them to dig faster, and to deflect accountability for their failures with every shovelful. If I may be so bold, I'd like to just cut to chase. Here's the right answer. The city needs to pony up some money to just help support renters, rather than trying to solve this crisis by regulating housing providers into oblivion.

Since we're all under the episodic threat of the Seattle government further crippling the housing market with rent control, let's use that as an example to illustrate what's happening. We can start by establishing that economists, those people that make careers of studying the kind of scarcity we're seeing in housing, have a broad and rare consensus, across political affiliations, that rent control is bad policy. Yes, I'm sure if you want, you can dig up some propaganda pieces that try to convince us it's actually a really great idea, or at least that economists are divided on it. You can find published work to support any position, no matter how contrary it runs to the consensus of experts. Just check out the Wikipedia page on it to get a clear picture about the failings of rent control policies. In any case, we'll just do a little thought experiment together to compare rent control to its much better counterpart, rent subsidies. We don't even have to get into the details of how each one might be implemented. The dynamics are always the same. Pretty much every form of rent subsidy is going to be favorable to pretty much every flavor of rent control.

We'll compare our options across three dimensions: who benefits, who pays for that benefit, and what is the net effect on the housing market. So, who benefits from rent control? Existing renters in their current rentals, all of them. According to this article on rentcafe.com in 2017 more than 28% of renters in Seattle were households earning $100,000 or more. And the trend along the previous decade was that that percentage was increasing quickly. So it could likely be even higher by now (2021). We don't need a policy that subsidizes the rent of people with six figure incomes. Sure, if it were free, we could spread the goodness all around. But of course it's not free. The true costs may be obscured, but they're very real, and so the benefits need to be reserved for, say, the 40% of renter households making less than $50,000 per year. Rent subsidies, by contrast, would of course let us be much more selective about where we focus our collective resources. What about the question of who pays for these benefits? In the case of subsidies, it's the taxpayers. We, the collective residents of Seattle, would share the burden for supporting the most vulnerable among us with meeting their basic needs, as it should be. In the case of rent control, that burden falls on the housing providers. Foregoing the income that they could otherwise earn is no different than paying the money outright. And that brings us to the impact on the housing market. The artificial limitation on what housing providers might earn will result in fewer housing providers participating in the market. Low availability and high prices (rents) are both just different expressions of housing scarcity. If you force prices to remain low, you'll exacerbate the lack of availability. You're actually worsening the scarcity overall, and simply trading one expression of it for another. That's why we can say that rent control could only help current renters in their current rentals. Anyone trying to move into the city, or anyone trying to move within the city, would find very few options for rentals and stiff competition to get one (yes, even worse than it is now). In contrast, housing subsidies increase the number of people who can pay market rates for housing. That will encourage housing providers to join and remain in the market, actually reducing the impacts of scarcity.

So to sum up why we should be talking about rental subsidies instead of rent control: they give the benefits specifically to the people that need it, they spread the burden over all tax payers, and they reduce the overall scarcity of housing. Rent control does none of this for us. Now, to be perfectly clear, I'm not at all singling out rent control as the one bad policy on the table. Every single time our city council passes a law that tries to regulate some aspect of housing when they could instead solve the problem by just helping renters in need pay for something, these exact same dynamics play out. So then, should we have put limits on the deposits housing providers can take, or instead have the city lend renters the money to cover deposits? Should we have paid to cover tenants' lawyers in eviction cases, or should we have provided a combination of grants and loans to keep struggling tenants current on their rent? Should we have forced rental applicants to compete based on the speed rather than the strength of their applications, or should we have been willing to put some city money on the table to make lower income renters more competitive as applicants? Should we have banned winter evictions (leaving renters to be evicted and in debt in the spring) or created winter subsidies and loans? In all of these and other examples, the laws we passed were the wrong choices. We just keep digging.

I know, proposing to spend government money without talking about budgets and taxes and such might seem like a bit of a cop out. I'm not even going to try to get into the weeds of the city finances right now, but let's just be clear about one thing. The general fund in the city budget, the part of the budget with real flexibility and discretion in how it is spent, hovers around $1.5 billion annually. Even just 1% of that general fund budget, $15 million annually in loans and direct subsidies to struggling renters, would make an enormous difference. Further, it would substantially reduce any supposed need for most of the so called "tenant protection" laws we've adopted over the past several years. Tenants would simply be able to meet their obligations. By comparison, the city spends about 20% of the general fund, or over $300 million per year, on its own administration. We don't have a money problem. We have a priorities problem.

Maybe the worst, most insulting, part of all of this is that the city council does what they do in the name of tenants. They refer to every law they pass as a 'win' for renters even as scarcity drives rents up and housing availability down every year. Not convinced? Please take a quick survey of every renter you know. Would they rather have a free lawyer when they're getting evicted, the latest 'win' by the city council, or be given funds to keep current on their rent obligations? This is a sham. Council members create the illusion that they're just giving renters what they wanted. That's simply dishonest. There's no genuine attempt to actually understand what renters want, because renters would almost always opt for the simpler and more effective solution. Just help them cover their costs.

It's also not just renters who are blatantly ignored and disregarded when these decisions are made and laws are passed. Anyone who opposes them, any member of the community that sees these as grossly insufficient and counterproductive efforts, will have their perspective dismissed and their character attacked. The fashionable rhetoric is that these laws are only opposed by "greedy" and "right wing" people who don't care about tenants. In all likelihood though, the vast majority of Seattleites who oppose this nonsense, including renters, do so because there are better ways to support tenants and improve housing that are at this point just blatantly obvious. Council members pretend that we're opposed to solving the problems, when our opposition is actually against their particular, ill-crafted solutions. The better solution, almost every time, is just to spend some money to help out renters who need it. It's pretty simple.